Revised Thesis Defense – Yaşar Kemal Peştreli

Revised PhD THESIS DEFENSE

“The Determinants of Local Currency Credit Spread: Evidence From Emerging Markets ”

Yaşar Kemal Peştreli, Ph.D. in Business Administration

Date: 15.11.2024

Time: 16:00

Location: : Özyeğin University Altunizade Campus - Classroom ALT 102

PhD Thesis Committee:

Dr. Levent Güntay, Özyeğin University

Dr. Emrah Ahi, Özyeğin University

Dr. S. Mehmet Özsoy, Özyeğin University

Dr. Çelim Yıldızhan, Koç University

Dr. Rıza Ergün Arsal, İstanbul Bilgi University

ABSTRACT:

This thesis investigates the determinants of local currency credit spread (LCCS) in emerging markets, with an emphasis on understanding how sovereign risk associated with local currency debts is influenced by both local and global economic factors. Utilizing a dynamic factor model, the study comprehensively analyzes data spanning from 2007 to 2021 across nine diverse emerging economies: Brazil, Hungary, Indonesia, Mexico, the Philippines, Poland, Russia, South Africa, and Turkey. This period, marked by significant global financial shocks, provides a robust context for examining the predictive power of the model. Furthermore, the thesis explores the macroeconomic fundamentals behind the weak co-movement in the LCCS compared to the foreign currency credit spread (FCCS). While inflation emerged as the main source of this dispersion, short-term debt, current account deficit, and financial markets index, a measure of how developed financial markets are in terms of their depth, access, and efficiency, are also important characteristics for the deterioration of local currency credit spread dynamics. The findings demonstrate that LCCS in emerging markets are shaped not only by traditional measures of default risk but also by a broader array of economic and political uncertainties, thus providing an insight for policymakers, investors, and analysts to make more informed decisions based on a deeper understanding of the diverse economic landscapes.

BIO:

Kemal Peştreli received his Bachelor of Science (BSc.) degree in Mathematics (2013) from Gebze Technical University. He completed his Master of Science (MSc.) degree in Financial Engineering and Risk Management at Özyeğin University in 2018. He has over ten years of experience in the finance industry, holding various roles in risk management, treasury, asset management, financial modeling, and consulting, alongside pursuing his master's and doctoral studies.